On August 17, Jack Lew, director of the Office of Management and Budget (OMB), sent all federal agency heads, including HUD Secretary Donovan, a memorandum directing them to identify ways to cut their agency budgets by 5 and 10 percent in FY 2013. The guidance states that each agency’s FY 2013 budget request to OMB should identify spending cuts to reduce its overall request by at least 5 percent compared to its FY 2011 discretionary appropriations level. Additionally, each agency should also identify discretionary spending cuts to reduce its request to 10 percent less than its FY 2011 discretionary appropriations amount.

The guidance states that the 5 and 10 percent reductions should not be achieved through across-the-board spending cuts or through reductions in mandatory spending. Lew clarified in an August 18 blog that the memorandum does not mean that every agency will receive either a 5 or 10 percent cut. It states that because OMB does not believe in making across-the-board cuts, “some agency budgets will decrease, some will stay flat, and some may increase.”

The budget guidance also directs department and agency heads to identify programs to “double down on because they provide the best opportunity to enhance economic growth.” The Administration would have to identify spending reductions elsewhere in the government’s overall budget to pay for increased investment in these programs.

The Budget Control Act of 2011 (the debt ceiling increase agreement) set the FY 2012 discretionary spending cap at $1.043 trillion, $7 billion less than the FY 2011 level, and set the FY 2013 discretionary cap at $1.047 trillion, $3 billion less than the FY 2011 level.

To date, the House has passed six FY 2012 appropriations bills, including the Agriculture and Rural Development bill; the Senate has passed one; and Congress has not completed work on any of them.

Neither the House nor the Senate Appropriations Subcommittee has acted on the FY 2012 Transportation-HUD appropriations bill.

When Congress returns from its August recess the week of September 5, it will have less than one month to complete its FY 2012 appropriations work before the new fiscal year begins October 1. The short time-frame makes it likely that Congress will need to pass a continuing resolution (CR), which would continue funding for all federally funded agencies without an enacted FY 2012 spending bill, so it can continue working to complete individual appropriations bills or a longer-term omnibus appropriations bill funding multiple agencies.